After Stanford's gluttony, investors get only crumbs

FILE - In this March 6, 2012 file photo, R. Allen Stanford leaves the Bob Casey Federal Courthouse in Houston. Stanford, once considered one of the wealthiest people in the U.S., with a financial empire that spanned the Americas, was convicted on charges he bilked investors out of more than $7 billion. The 62-year-old is set to be sentenced by a Houston federal judge on Thursday, June 14, 2012. (AP Photo/Houston Chronicle, Nick de la Torre, File) less

FILE - In this March 6, 2012 file photo, R. Allen Stanford leaves the Bob Casey Federal Courthouse in Houston. Stanford, once considered one of the wealthiest people in the U.S., with a financial empire that ... more

Photo: Nick De La Torre, MBO

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Former Stanford investor and director of the Friends of Stanford Victims Angela Shaw talks to the media outside the Bob Casey Federal Courthouse as R. Allen Stanford was sentenced to 110 years in prison for being involved in a Ponzi scheme causing investors to lose their money Thursday, June 14, 2012, in Houston.
( Johnny Hanson / Houston Chronicle ) less

Former Stanford investor and director of the Friends of Stanford Victims Angela Shaw talks to the media outside the Bob Casey Federal Courthouse as R. Allen Stanford was sentenced to 110 years in prison for ... more

Photo: Johnny Hanson, Staff

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Ralph Janvey is the court appointed receiver in the Stanford Financial case on March 20, 2009 in Houston, TX. Mayra Beltran / Houston Chronicle

Ralph Janvey is the court appointed receiver in the Stanford Financial case on March 20, 2009 in Houston, TX. Mayra Beltran / Houston Chronicle

Photo: Mayra Beltran, Staff

After Stanford's gluttony, investors get only crumbs

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For investors swindled by R. Allen Stanford, it's the final insult. After four years, they get back even less of a pittance than they expected.

In a recent court filing, the receiver in charge of unraveling Stanford's fraudulent empire outlined plans to distribute an initial payment of about $55 million, which will equal about one penny for every dollar investors lost.

"It is a start, albeit a pitiful one," said Ann Lesterjette, a Stanford investor in Baytown who was forced to return to work after she lost her retirement. "If indeed we are paid 1 cent on the dollar, that is a drop in the bucket."

While other payments may follow, the size of the initial disbursement sets a troubling tone for what is the final chapter of the Stanford saga.

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From the beginning, the Ponzi scheme run by Stanford was stunning, not just for its size but also for the sheer lack of assets that the court-appointed receiver was able to recover to help repay investors.

At one point, Stanford's victims had hoped they might get 10 to 12 cents back for every dollar they lost, but that now seems unlikely.

The payments will be the first disbursements to investors from Stanford's estate, and any subsequent payments are likely to be even smaller. It has been a troubling pattern that has permeated the Stanford case - when it comes to investors' money, everything is less than it appears.

Compounding the insult is the fruitless hunt for assets by the court-appointed receiver, a process that wound up costing almost $57 million in legal fees - more than the 30,000 investors are getting back in the initial payment. The receiver spent another $52 million winding down Stanford's businesses, according to a court filing in June.

"The investors would have been better off at the beginning if nothing had been done and they just distributed what was there," said Peter Pratt, a Houston lawyer who handles receivership cases but isn't involved in the Stanford saga. "They spent a lot of money in legal fees to find out that there wasn't a lot there. I think that was apparent from the beginning."

Angela Shaw, head of the Stanford Victims Coalition, noted that the estate had more cash on hand when the receiver took over than it does after four years of trying to recover assets.

"It is a very harsh reality the Stanford Financial Group empire had more cash on hand the day the companies were taken into receivership almost four years ago than is now available for the victim," she said.

The legal fees remain a sore point with investors, many of whom believe the receiver, Ralph Janvey, spent money carelessly, running up fees for himself and his firm while only adding to investors' plight.

Winding down a fraudulent company, though, especially one as big as Stanford, isn't that simple, said Janvey's attorney, Kevin Sadler.

"It cost a lot of money just to clean up this mess," Sadler said, adding that even if Janvey had done nothing, investors' recovery would still have been minimal. "We understand that people are upset, but what is the alternative?" he said. "I can't imagine that anybody would have been suddenly happy that they had gotten 3 cents instead of 1 cent."

Several international disputes remain and Janvey has cases pending against hundreds of investors and former employees who he claims profited inappropriately from Stanford's fraud. Recovering that money, though, could take years and may never generate a significant payment for investors. Unlike the Bernard Madoff case, no rich investors or former employees are hiding billions for victims to claw back.

While investors may be angry about the amount being returned, they shouldn't be surprised, Sadler said.

"It's just another painful reminder that everyone's known since February 2009, that from the time this thing got shut down, most of the money was gone," he said.

Certainly, none of the victims expected to recover much. For them, Allen Stanford's conviction and the 110-year prison sentenced he began serving last year are as close as they're likely to get to satisfaction.

As if they needed another reminder of that, their checks will soon be in the mail. They will arrive not as a remedy, but as yet another insult.